Broadcom closes $69 billion VMware deal after China approval

Broadcom closes $69 billion VMware deal after China approval | The Enterprise World


Broadcom successfully concluded its $69 billion acquisition of cloud-computing firm VMware on Wednesday, marking the closure of one of the largest global deals announced in May 2022. The acquisition, a strategic move by Broadcom CEO Hock Tan to bolster the chipmaker’s software business, faced extensive regulatory scrutiny worldwide, leading to three postponements of the closing date.

The last major hurdle was cleared with China granting regulatory approval on Tuesday, alleviating concerns among investors who had feared complications due to heightened tensions between the U.S. and China over stricter chip export controls. The approval came after several delays and uncertainties, with the final green light contributing to a more positive market sentiment.

Approval from the European Commission

Danni Hewson, Head of Financial Analysis at AJ Bell, noted that the improved mood in the wake of a meeting between China’s President Xi Jinping and U.S. President Joe Biden earlier in the month played a role in settling remaining anxieties. The European Commission had already given its approval after Broadcom addressed concerns by offering remedies to support competitor Marvell Technology. Similarly, the UK’s Competition and Markets Authority (CMA) granted its approval following a thorough investigation.

Cabot Henderson, Market Strategist at JonesTrading, expressed cautious optimism about the future of big tech mergers, pointing out that the approvals for Activision Blizzard and VMware might encourage other companies to move forward. However, the regulatory landscape remains dynamic, and each deal will be scrutinized on its merits.

While Broadcom’s acquisition of VMware lacked the high-profile glamour of other major tech mergers, such as Microsoft’s $69 billion purchase of Activision, it holds significant importance in the tech industry. Based in San Jose, Broadcom plays a foundational role in internet infrastructure, providing products widely used in data centers, cloud services, and network infrastructure. On the other hand, VMware specializes in virtualization and cloud computing software, enabling secure connections between local networks and public cloud access for corporations.

Restricting access to or bundling VMware’s software

The European Commission’s concerns during the regulatory process centered on potential competition issues, fearing Broadcom might limit interoperability between rival hardware and VMware’s server virtualization software. Additionally, there were concerns about Broadcom possibly restricting access to or bundling VMware’s software with its own hardware products.

With all necessary regulatory approvals secured, Broadcom expressed enthusiasm about welcoming VMware into its fold. The successful completion of this significant acquisition underscores the evolving landscape of the tech industry, where regulatory scrutiny is becoming increasingly rigorous, particularly for major mergers and acquisitions.

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